Global financial markets are navigating a volatile landscape, with mixed performance in APAC stocks as initial optimism faded. Early risk-on sentiment emerged after US President Trump refrained from imposing tariffs on day one. However, this was quickly tempered by his remarks suggesting a potential 25% tariff on Mexico and Canada, which he speculated could take effect on February 1st.

European Markets Eye a Softer Open

European equity futures point to a weaker start, with the Euro Stoxx 50 futures down 0.4%. This follows a modest 0.3% gain in Monday’s cash market, as investors weigh the potential implications of US trade policy and broader economic indicators.

Currency Markets in Flux

In the currency space, the US Dollar Index (DXY) is attempting to recover some of its recent losses. Meanwhile, the Canadian Dollar (CAD) lags behind, reflecting potential trade concerns, and antipodean currencies remain under pressure. The EUR/USD pair has slipped back below the 1.04 level, signaling ongoing caution among forex traders.

Key Events to Watch

Looking ahead, several high-impact events are poised to influence market sentiment:

• Economic Data: Key reports include UK Jobs, German ZEW Economic Sentiment, Canadian CPI, and Q4 New Zealand CPI.
• Government Debt Supply: Germany is set to hold bond auctions.
• Corporate Earnings: A slate of major earnings releases is scheduled, including Charles Schwab Corp, D.R. Horton, KeyCorp, 3M, Fifth Third Bancorp, Prologis, Netflix, United Airlines, Capital One Financial Corp, Abrdn, and Ericsson.

Market Sentiment Hinges on Data and Policy

As traders assess the impact of potential tariffs and digest incoming economic data, volatility could remain a defining feature of the market landscape. With key earnings and data releases on the horizon, market participants will be closely monitoring developments for clues on the trajectory of global growth and trade dynamics.